The New Republic

The New Republic

Despite outrage in the UK, the LIBOR scandal lacks a clear class of victims. “Does that mean the LIBOR scandal isn’t a big deal? Not at all. As I argued in this earlier post, it’s a very big deal. But it’s just a bit more abstract than your typical scandal. To see this, I’d propose the following (crude) analogy, in honor of yesterday’s baseball all-star game. Suppose the six wealthiest Major League teams got together and convinced the commissioner to move in every park’s fence ten feet without the rest of the league knowing. (Suppose they benefit because fans like to see more home runs hit, and they make their money on TV revenues.) The upshot is that some teams would give up more home runs and lose certain games, but some teams would hit more home runs and win certain games. Once the conspiracy was unearthed, fans of the first set of teams would complain loudly; fans of the second would probably keep quiet. But, overall, it would be hard to say that a certain class of team benefited more than another class. Or even that certain teams consistently benefited more than others. It would appear to be a kind of wash. (Yes, some teams are built more around hitting and some more around pitching, so you can imagine some small, systematic effect. But set that aside for the sake of argument.) And yet, just because the conspiracy resulted in a wash doesn’t mean we shouldn’t or wouldn’t be outraged. All baseball fans would be outraged on some level because the integrity of the game had been compromised.” — Noam Scheiber, “Why Hasn’t the LIBOR Scandal Blown Up? No Victims”
Zoom

Despite outrage in the UK, the LIBOR scandal lacks a clear class of victims.

“Does that mean the LIBOR scandal isn’t a big deal? Not at all. As I argued in this earlier post, it’s a very big deal. But it’s just a bit more abstract than your typical scandal. To see this, I’d propose the following (crude) analogy, in honor of yesterday’s baseball all-star game. Suppose the six wealthiest Major League teams got together and convinced the commissioner to move in every park’s fence ten feet without the rest of the league knowing. (Suppose they benefit because fans like to see more home runs hit, and they make their money on TV revenues.) The upshot is that some teams would give up more home runs and lose certain games, but some teams would hit more home runs and win certain games. Once the conspiracy was unearthed, fans of the first set of teams would complain loudly; fans of the second would probably keep quiet. But, overall, it would be hard to say that a certain class of team benefited more than another class. Or even that certain teams consistently benefited more than others. It would appear to be a kind of wash. (Yes, some teams are built more around hitting and some more around pitching, so you can imagine some small, systematic effect. But set that aside for the sake of argument.)

And yet, just because the conspiracy resulted in a wash doesn’t mean we shouldn’t or wouldn’t be outraged. All baseball fans would be outraged on some level because the integrity of the game had been compromised.”

— Noam Scheiber, “Why Hasn’t the LIBOR Scandal Blown Up? No Victims”

Noam Scheiber on how megabanks corrupt regulators. “Is it even possible to regulate megabanks in any meaningful sense? After all, if the allegations are true, officials at the Bank of England weren’t sending these hints to Barclays because they took a shine to Barclays’ executives or because they stood to benefit personally if the bank’s share-price rose. They were doing it because they worried that a run on a bank as big as Barclays would destabilize the British economy and wanted to do everything possible to avoid that, even if it meant skirting the rules (again, according to the allegations).  Which is to say, in order to get corruption in your banking system, you don’t need literal corruption of the Government Official X owns shares in Bank Y variety (or even Official X wants to work at Bank Y after he leaves government). You just need banks big enough so that the bureaucrats keeping an eye on them have nightmares about what happens if the banks fail.” –– Noam Scheiber, “How Megabanks Corrupt Regulators, LIBOR Edition“ 
Zoom

Noam Scheiber on how megabanks corrupt regulators.

“Is it even possible to regulate megabanks in any meaningful sense? After all, if the allegations are true, officials at the Bank of England weren’t sending these hints to Barclays because they took a shine to Barclays’ executives or because they stood to benefit personally if the bank’s share-price rose. They were doing it because they worried that a run on a bank as big as Barclays would destabilize the British economy and wanted to do everything possible to avoid that, even if it meant skirting the rules (again, according to the allegations). 

Which is to say, in order to get corruption in your banking system, you don’t need literal corruption of the Government Official X owns shares in Bank Y variety (or even Official X wants to work at Bank Y after he leaves government). You just need banks big enough so that the bureaucrats keeping an eye on them have nightmares about what happens if the banks fail.”

–– Noam Scheiber, “How Megabanks Corrupt Regulators, LIBOR Edition“